IDEAS home Printed from https://ideas.repec.org/p/car/carecp/03-06.html
   My bibliography  Save this paper

IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade

Author

Abstract

A simple Smith-Ricardo model is developed that incorporates division of labor into the continuum-good Ricardian model of Dornbusch et al.(1977). The trade off between the efficiency gain and coordination cost associated with production specialization de-termines the efficient level of division of labor. The model is applied to explain how the recent IT revolution could affect a country’s efficient level of production specialization and competitive advantage. In particular, absolute advantage (in division of labor) and relative labor supply plays a crucial role in determining the effects of an IT progress on a country’s competitive margin in international trade.

Suggested Citation

  • Zhihao Yu, 2003. "IT, Production Specialization, and Division of Labor: A Smith-Ricardo Model of International Trade," Carleton Economic Papers 03-06, Carleton University, Department of Economics.
    • Handle: RePEc:car:carecp:03-06
    as

    Download full text from publisher

    File URL: http://www.carleton.ca/economics/wp-content/uploads/cep03-06.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. John McLaren, 2000. ""Globalization" and Vertical Structure," American Economic Review, American Economic Association, vol. 90(5), pages 1239-1254, December.
    3. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-245, May.
    4. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
    5. Grossman, Gene M & Helpman, Elhanan, 1989. "Product Development and International Trade," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1261-1283, December.
    6. Gene M. Grossman & Elhanan Helpman, 1991. "Quality Ladders in the Theory of Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(1), pages 43-61.
    7. Wen Li Cheng & Jeffrey Sachs & Xiaokai Yang, 2005. "An Inframarginal Analysis Of The Ricardian Model," World Scientific Book Chapters, in: An Inframarginal Approach To Trade Theory, chapter 6, pages 87-107, World Scientific Publishing Co. Pte. Ltd..
    8. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December.
    9. Grossman, Gene M & Helpman, Elhanan, 1990. "Comparative Advantage and Long-run Growth," American Economic Review, American Economic Association, vol. 80(4), pages 796-815, September.
    10. Gene M. Grossman & Elhanan Helpman, 2005. "Outsourcing in a Global Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(1), pages 135-159.
    11. Chen, Yongmin & Ishikawa, Jota & Yu, Zhihao, 2004. "Trade liberalization and strategic outsourcing," Journal of International Economics, Elsevier, vol. 63(2), pages 419-436, July.
    12. repec:bla:reviec:v:8:y:2000:i:2:p:208-20 is not listed on IDEAS
    13. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    14. P. J. Lloyd & Hyun-Hoon Lee (ed.), 2002. "Frontiers of Research in Intra-Industry Trade," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28598-9, December.
    15. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, vol. 67(5), pages 823-839, December.
    16. Ethier, Wilfred J, 1982. "Decreasing Costs in International Trade and Frank Graham's Argument for Protection," Econometrica, Econometric Society, vol. 50(5), pages 1243-1268, September.
    17. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    18. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, April.
    19. Zhao, Laixun, 2001. "Unionization, vertical markets, and the outsourcing of multinationals," Journal of International Economics, Elsevier, vol. 55(1), pages 187-202, October.
    20. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    21. repec:pri:wwseco:dp218 is not listed on IDEAS
    22. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59(3), pages 185-185.
    23. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
    24. Nicolas Schmitt & Zhihao Yu, 2002. "Horizontal Intra-Industry Trade and the Growth of International Trade," Palgrave Macmillan Books, in: P. J. Lloyd & Hyun-Hoon Lee (ed.), Frontiers of Research in Intra-Industry Trade, chapter 3, pages 33-48, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    2. Egger, Hartmut & Egger, Peter, 2007. "Outsourcing and trade in a spatial world," Journal of Urban Economics, Elsevier, vol. 62(3), pages 441-470, November.
    3. Pol Antràs & Robert W. Staiger, 2012. "Offshoring and the Role of Trade Agreements," American Economic Review, American Economic Association, vol. 102(7), pages 3140-3183, December.
    4. Zhihao Yu, 2003. "A New Push on An Old Fundamental: Understanding the Patterns of Outsourcing," Carleton Economic Papers 03-08, Carleton University, Department of Economics.
    5. Dermot Leahy & Catia Montagna, 2006. "'Make-or-Buy' in International Oligopoly and the Role of Competitive Pressure," Dundee Discussion Papers in Economics 197, Economic Studies, University of Dundee.
    6. Barbara Spencer, 2005. "International outsourcing and incomplete contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1107-1135, November.
    7. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.
    8. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    9. Mitsuyo Ando & Sven W. Arndt & Fukunari Kimura, 2006. "Production Networks in East Asia : Strategic Behavior by Japanese and U.S. firms," Microeconomics Working Papers 21886, East Asian Bureau of Economic Research.
    10. Ornelas, Emanuel & Turner, John L., 2008. "Trade liberalization, outsourcing, and the hold-up problem," Journal of International Economics, Elsevier, vol. 74(1), pages 225-241, January.
    11. Kemal Türkcan, 2011. "Vertical Intra-Industry Trade and Product Fragmentation in the Auto-Parts Industry," Journal of Industry, Competition and Trade, Springer, vol. 11(2), pages 149-186, June.
    12. Deborah L. Swenson, 2007. "Competition and the location of overseas assembly," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(1), pages 155-175, February.
    13. Gene M. Grossman & Esteban Rossi-Hansberg, 2008. "Trading Tasks: A Simple Theory of Offshoring," American Economic Review, American Economic Association, vol. 98(5), pages 1978-1997, December.
    14. Prema-chandra Athukorala, 2011. "Production Networks and Trade Patterns in East Asia: Regionalization or Globalization?," Asian Economic Papers, MIT Press, vol. 10(1), pages 65-95, Winter/Sp.
    15. Liza Jabbour, 2012. "‘Slicing the Value Chain’ Internationally: Empirical Evidence on the Offshoring Strategy by French Firms," The World Economy, Wiley Blackwell, vol. 35(11), pages 1417-1447, November.
    16. Chrysovalantou Milliou & Joel Sandonis, 2016. "Vertical Foreign Direct Investment: Make, Sell and (Not) Buy," CESifo Working Paper Series 6190, CESifo.
    17. Bas, Maria & Carluccio, Juan, 2009. "Wage bargaining and the boundaries of the multinational firm," LSE Research Online Documents on Economics 28700, London School of Economics and Political Science, LSE Library.
    18. Dermot Leahy & Catia Montagna, 2011. "Economising, Strategising and the Decision to Outsource," Discussion Papers 11/17, University of Nottingham, GEP.
    19. Hea-Jung Hyun & Jung Hur, 2014. "Trade Openness and Vertical Structure: Evidence From Korean Firm-Level Data," Open Economies Review, Springer, vol. 25(4), pages 701-720, September.
    20. Meng, Bo & Ye, Ming, 2022. "Smile curves in global value chains: Foreign- vs. domestic-owned firms; the U.S. vs. China," Structural Change and Economic Dynamics, Elsevier, vol. 60(C), pages 15-29.

    More about this item

    Keywords

    Division of labor; Production specialization; Information technology; Coordination cost; International Trade;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:car:carecp:03-06. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Court Lindsay (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.